Mitesco, Inc. - Quarter Report: 2013 March (Form 10-Q)

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer	[    ]	Accelerated filer	[     ]
Non-accelerated filer	[    ]  (Do not check if a smaller reporting company)	Smaller reporting company	[ X ]

 

Class		Outstanding at May 20, 2013
Common Stock, $.001 par value per share		37,075,197

 

TABLE OF CONTENTS

		Page
PART  I    —   FINANCIAL INFORMATION
Item 1.	Financial Statements	1
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	19
Item 4.	Controls and Procedures	19
PART II   —   OTHER INFORMATION
Item 1.	Legal Proceedings
Item 1A.	Risk Factors	20
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults upon Senior Securities	21
Item 4.	Mine Safety Disclosures	21
Item 5.	Other Information	21
Item 6.	Exhibits	22
	Signatures	23

 

 

		March 31,				December 31,
		2013				2012
		(Unaudited)
ASSETS
Current assets
Cash		$	31,559			$	13,724
Accounts receivable			26,732				1,615
Total current assets			58,291				15,339
Property and equipment
Fixtures and equipment			183,208				178,348
Less accumulated depreciation			(135,402	)			(125,621	)
			47,806				52,727
Capitalized software development costs
Costs incurred			3,221,442				3,114,295
Less accumulated amortization			(2,573,732	)			(2,463,347	)
			647,710				650,948
Other assets
Debt issuance costs			50,387				60,305
TOTAL ASSETS		$	804,194			$	779,319
LIABILITIES
Current liabilities
Accounts payable		$	683,538			$	619,304
Accrued interest and other liabilities			220,370				133,235
Notes payable-related party			73,095				70,761
Convertible note payable			104,274				49,024
Deferred revenue			142,167				28,267
Deferred rent, current portion			3,378				5,907
Total current liabilities			1,226,822				906,498
Long-term liabilities
Debentures Series A and B, carrying value			829,290				776,007
Total long-term liabilities			829,290				776,007
Total Liabilities			2,056,112				1,682,505
Commitments and Contingencies
STOCKHOLDERS' DEFICIT
Common stock, $0.001 par value - 50,000,000 shares   authorized,  37,020,197 and 36,131,432 shares issued and outstanding at March 31, 2013  and December 31, 2012, respectively.			37,020				36,131
Additional paid-in-capital			8,825,776				8,405,482
Accumulated other comprehensive loss			(4,768	)			(8,299	)
Retained Earnings			(10,109,946	)			(9,336,500	)
Total Stockholders' Deficit			(1,251,918	)			(903,186	)
TOTAL LIABILTIES AND STOCKHOLDERS' DEFICIT		$	804,194			$	779,319

		(Unaudited)
		For the Three Months Ended  March 31,
		2013				2012
Net Sales		$	24,870			$	10,758
Cost of sales			12,367				1,382
Gross Profit			12,503				9,376
Operating Expenses:
Research and development			329,613				338,164
Selling, general and administrative			337,072				313,044
			666,685				651,208
Loss From Operations			(654,182	)			(641,832	)
Other Expense:
Interest expense			(119,264	)			--
Net Loss			(773,446	)			(641,832	)
Other Comprehensive Gain, Net of Tax:
Foreign currency translation adjustments			3,531				--
Comprehensive Loss		$	(769,916	)		$	--
Net Loss per Share - Basic and Diluted		$	(0.02	)		$	(0.02	)
Weighted Average Number of Shares - Basic and Diluted			36,459,426				33,418,021

 

 

		Common Stock								Additional Paid-in				Accumulated Other Comprehensive				Retained				Total Stockholders'
		Shares				Amount				Capital				Loss				Earnings				(Deficit)
Balance at December 31, 2012			36,131,432			$	36,131			$	8,405,482			$	(8,299	)		$	(9,336,500	)		$	(903,186	)
Sale of common stock, net issuance costs			658,055				658				248,092				-				-				248,750
Common stock issued upon conversion of trade and note payables			185,710				186				74,098				-				-				74,284
Shares issued for services			45,000				45				1,099				-				-				1,144
Employee stock based compensation			-				-				97,005				-				-				97,005
Foreign currency translation gain			-				-				-				3,531				-				3,531
Net loss			-				-				-				-				(773,446	)			(773,446	)
Balance at March  31, 2013 (Unaudited)			37,020,197			$	37,020			$	8,825,776			$	(4,768	)		$	(10,109,946	)		$	(1,251,918	)

 

The accompanying Notes are an integral part of the Condensed Consolidated Financial Statements.

 

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NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-Continued

 

 

 

 

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Trunity platform	Estimated Life		Gross Cost				Accumulated Amortization				Net Book Value
Assets acquired from Trunity, LLC	3 years		$	1,775,000			$	(1,775,000	)		$	-
Internal costs capitalized for period from July 28, 2009 (inception) to December 31, 2009	3 years			121,820				(121,820	)		$	-
Internal costs capitalized for the twelve months ended December 31, 2010	3 years			342,345				(313,816	)		$	28,529
Internal costs capitalized for the twelve months ended December 31, 2011	3 years			327,100				(190,808	)		$	136,292
Internal costs capitalized for the twelve months ended December 31, 2012	3 years			548,031				(163,360	)		$	384,671
Internal costs capitalized for the twelve months ended March 31, 2013	3 years			107,147				(8,929	)		$	98,218
Carrying value as of March 31, 2013											$	647,710

 

 

For the period ending March 31, 2013:
2013		$	274,098
2014			272,909
2015			100,703
Total future amortization expense		$	647,710

 

 

 

In connection with the issuance of the July 2012 Notes, the Company paid transactions fees to brokers consisting of cash of $85,237, and warrants to purchase 43,497 shares over a two-year period for an exercise price of 0.40 Canadian Dollars.  The Company estimated the fair value of the warrants using a Black Scholes valuation model and the following assumptions: volatility – 50.49%, risk free rate - 0.22%, dividend rate – 0.00%.  The Company allocated a portion of the fair value of the consideration totaling.$52,869, to debt issuance costs, which was capitalized and is being amortized into interest expense over the two-year terms of the notes. The remaining portion of the fair value of the transactions costs, totaling$36,126 was allocated to equity, treated as equity issuance costs, and recorded against additional paid in capital. Amortization of debt issuance costs on the Notes of $6,609 was recorded for the three months ended March 31, 2013.

 

NOTE 5 – CONVERTIBLE DEBT- Continued

 

October and November 2012 Convertible Debentures-In October and November 2012, the Company issued convertible debentures (“Notes”) with an aggregate face value of $624,372 of which $313,440 represented a conversion of notes payable- related parties to the Founders. The notes mature in October and November 2014, bear interest at an annual rate of 10%, and are convertible at the option of the holders into Units, each consisting of a) one share of common stock and b) one warrant to purchase one share of common stock at $0.40 per share (“Unit”).  The number of units issuable upon conversion of the notes is determined by dividing the then outstanding principal and accrued but unpaid interest by a) $0.35 if a Liquidity Event, as defined in the debenture agreements, occurs within six months of the closing of the offering of the notes, or b) $0.32 if a Liquidity Event does not occur within six months of the closing of the offering of the notes. The Company recorded a beneficial conversion feature based on the intrinsic value of the conversion feature equal to the excess of the fair value of one Unit over the conversion rate of $0.32. The fair value of one Unit was estimated based on the most recent sale of common stock in a private placement immediately preceding the issuance of the Notes and, for the warrant contained in one Unit, using a Black Scholes valuation model and the following assumptions: volatility – 50.50%, risk free rate - 0.22%, dividend rate – 0.00%. The Company recorded a discount against the debt for the beneficial conversion feature totaling $254,004, which is being amortized into interest expense through the maturity dates of the Notes. For the three months ended March 31, 2013, the Company recorded amortization of the discount of $31,750. As of March 31, 2013 the net carrying value of the Notes totaled $423,235, net of unamortized discount of $201,137. For the three months ended March 31, 2013 interest expense on the Notes of $15,609 was recorded.

 

 

		Face Value				Initial Discount				Accumulated Amortization				Carrying Value
July 2012 Notes		$	213,642			$	(84,788	)		$	28,263			$	157,117
September 2012 Notes			330,900				(115,712	)			33,749				248,937
October & November Notes			59,000				(13,317	)			2,999				48,682
November – Related Party Notes			565,372				(240,687	)			49,868				374,553
Total		$	1,168,914			$	(454,504	)		$	114,879			$	829,289

		Issuance Date				December 31, 2012				March 31, 2013
Expected Volatility			51.08	%			52.67	%			40.55	%
Expected Term		0.75 Years				0.6 Years				0.3 Years
Risk Free Interest Rate			0.19	%			0.16	%			0.07	%
Dividend Rate			0	%			0	%			0	%

		Issuance Date				March 31, 2013
Expected Volatility			50.77	%			49.82	%
Expected Term		0.75 Years				0.45 Years
Risk Free Interest Rate			0.11	%			0.11	%
Dividend Rate			0	%			0	%

 

	Shares		Weighted-Average Exercise Price			Weighted- Average Remaining Contractual Term
Outstanding at December 31, 2012	661,947		$	1.25		2.15
Granted	843,770		$	1.00		2.00
Exercised	--			--		--
Expired	(11,667)		$	3.00		3.00
Outstanding at March 31, 2013	1,494,050		$	1.00		1.91
Exercisable at March 31, 2013	1,494,050		$	1.00		1.91

 

 

 

 

 

 

 

 

Plan of Operation

·		pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
·		provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
·		provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

This Item is not applicable to our company’s operations.

 

 

 

Exhibit 31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. **
Exhibit 31.2	Certification of Principal Financial Officer and Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. **
Exhibit 32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **
Exhibit 32.2	Certification of Principal Financial Officer and Principal Accounting Officer Pursuant to18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **

101.INS	XBRL INSTANCE DOCUMENT **
101.SCH	XBRL TAXONOMY EXTENSION SCHEMA **
101.CAL	XBRL TAXONOMY EXTENSION CALCULATION LINKBASE **
101.DEF	XBRL TAXONOMY EXTENSION DEFINITION LINKBASE **
101.LAB	XBRL TAXONOMY EXTENSION LABEL LINKBASE **
101.PRE	XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE **

 

	TRUNITY HOLDINGS, INC.
Date:  May 20, 2013	By:  /s/ Terry Anderton
	Terry Anderton,
	Chief Executive Officer
Date:  May 20, 2013	By:  /s/ Nicole M. Fernandez-McGovern
	Nicole M. Fernandez-McGovern,
	Chief Financial Officer and Chief Accounting Officer

 

 

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